A company sold $10 million of electronics equipment during 2012.The cost of the goods sold was $5.4 million.They estimate that the warranty costs are normally 1.5% of sales and the company normally has difficulty in collecting 2% of its sales.What amount should they record as expenses related to those sales in 2012?

Question

Quizplus · Accepted Answer

Using the formula, we get:
5.4 million + (0.015 x 10 million) + (0.02 x 10 million) = $5.75 million. Therefore, the amount that should be recorded as expenses related to those sales in 2012 is $5.75 million, which is option D.

A Company Sold $10 Million of Electronics Equipment During 2012